All posts tagged Coal Seam Gas

A US$18.5 billion Australian natural-gas project is short of natural gas for its export terminal. A rival project nearby without an export terminal needs somewhere to process its natural gas for export.

Sound like a recipe for a major deal? Analysts are increasingly thinking so.

The first project is a liquefied natural gas, or LNG, joint venture in Australia’s Queensland state known as GLNG that includes local player Santos Ltd. and France’s Total SA. The competing project that hasn’t started construction yet is a joint venture between Royal Dutch Shell Plc and PetroChina Co. known as Arrow Energy.

Luke Smith, an energy analyst at Commonwealth Bank of Australia, reckons GLNG is “uneconomic” in its current form and will struggle to be profitable if it can’t find a way to increase its value.

Hong Kong-listed MIE Holdings is poised to acquire a 51% interest in a unit of Sino Gas & Energy Holdings, a move that secures funding for the development of two coal seam gas tenements in central China, a person familiar with the matter told Deal Journal Australia.

The deal involves MIE Holdings paying US$10 million upfront to acquire an initial interest in Sino Gas & Energy Ltd., currently wholly owned by Sino Gas & Energy Holdings, and a commitment to invest a further US$90 million at a later date to advance the development of the Sanjiaobei and Linxing assets.

Sino Gas & Energy Holdings said June 4 it had signed a letter of intent to fund its interests in China, but didn’t identify the counterparty.

ExxonMobil is preparing to open up a new frontier for the coal seam gas industry in Australia.

In doing so, it may help reshape the debate around unconventional fuels that has increasingly pitted the energy industry against farmers and prompted legislators to make large tracts of land off limits to exploration and production.

Exxon is setting up a joint venture with closely held Ignite Energy Resources to explore and potentially develop coal reserves of methane gas occurring naturally within more than 16 billion tons of brown coal close to the surface in the Gippsland Basin of southeast Victoria, and over 280 billion tons in deeper seams.

Molopo Energy believes it already has a company-making asset in the Wolfcamp acreage in West Texas, but it won’t say no to another.

The ASX-listed oil company is in “soft discussions” on a number of possible acquisition opportunities, although in the first quarter of the year it rejected as many as 15 proposals, said Tim Granger, Molopo’s Calgary-based chief executive officer and managing director.

“We are scouting around,” Mr. Granger said in an interview between meeting Australia-based investors and analysts, adding the company wasn’t about to rush into a deal.

Recent developments in the fledgling sector have hardened Moelis analyst Gundi Royle’s opinion that investors should sell the likes of Santos and Origin Energy–and switch into energy stocks exposed to more conventional resources, such as Woodside Petroleum and Oil Search, instead.

Last week, BG Group announced a 36% cost blowout at its terminal at Gladstone in Queensland state to more than US$20 billion. But that didn’t hurt sentiment at Citigroup, Deutche Bank, J.P. Morgan, Macquarie and UBS, which all immediately reiterated buy or outperform recommendations on Santos stock.

Coal seam gas, or CSG, is attracting its fair share of criticism in Australia. Now, the analysts are starting to take note.

Citigroup says the controversial method of extracting gas is proving a headache for AGL Energy in New South Wales, or NSW, as its ability to pursue its exploration program in the Gloucester and Hunter basins is being hindered by community issues and the state government’s “reluctance in taking a decisive stance” on the role of the technology in the long term.

A spokesperson for AGL was unreachable for comment.

Coal seam gas–trapped stores of methane hundreds of meters below the Earth’s crust–is one of the world’s hottest energy plays. Projects worth tens of billions of U.S. dollars are under construction in neighboring Queensland state to convert raw gas into liquefied natural gas for export to Asia. The rapid growth of the Queensland coal seam gas sector prompted several companies to explore the potential of coal-rich land in NSW.

Dart Energy’s push to bulk up in European unconventional gas is a sign it remains on course to list its international business in Singapore early this year, rather than join the ranks of IPOs scuppered by weak equity markets.

Dart acquired 22 onshore gas licenses in the U.K. from Greenpark Energy for A$42 million on Dec. 28, just days after buying out joint venture partner BG Group from 14 coal seam gas licenses in the U.K.

About Deal Journal Australia

Deal Journal Australia is an up-to-the-minute take on the deals and deal makers that shape the Australian landscape, including mergers and acquisitions, capital raisings, private equity and debt markets. In short, wherever money changes hands. Deal Journal Australia is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s Gillian Tan is the lead writer, with contributions from other Journal and Dow Jones reporters and editors. Send news items, comments and questions to gillian.tan@wsj.com.

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